MARKET WATCH: Crude oil prices decline; gas continues rally

Crude oil prices were pulled down Oct. 2 by weakness in the US gasoline market, but natural gas maintained its rally for the sixth consecutive session in the New York market on forecasts for colder weather.

“Gasoline prices have fallen as participants grow concerned that supplies will start to rise as East Coast refineries come back on line after maintenance and repairs,” said Marc Ground at Standard New York Securities Inc., the Standard Bank Group. “Refinery shutdowns, together with the US driving season over the summer months, have seen gasoline inventories reach particularly low levels, which until now has kept gasoline prices aloft and consequently provided support for crude prices,” he added.

In Houston, analysts at Raymond James & Associates Inc. reported the equity market “edged slightly higher” Oct. 2, “even as investors grew increasingly concerned that Spain will soon request a bailout from the European Central Bank.” The SIG Oil Exploration & Production Index gained 0.4%, but the Oil Service Index declined 0.4%.

Ground said, “Weaker Chinese Purchasing Managers Index services data (53.7 in September, compared with 56.3 in August) and strengthening bias in the dollar has extended the move lower in crude oil prices [in early trading Oct. 3]. There was a let up in dollar strength earlier after better-than-expected Euro-zone retail sales figures. However, this was short-lived.” Euro-zone retail sales were up 0.1% month-over-month compared with a consensus for a 0.1% decline.

In other news, Automatic Data Processing Inc. said Oct. 3 US business added 162,000 jobs in September, down from the revised-lower August addition of 189,000 jobs. The September data were better than some economists expected but not enough to reduce the unemployment rate that has exceeded 8% for 3½ years. It takes 100,000 new jobs each month just to match growth of the working-age population, officials said.

US inventories

The Energy Information Administration said Oct. 3 commercial US crude inventories dipped by 500,000 bbl to 364.7 million bbl in the week ended Sept. 28, frustrating Wall Street’s consensus for a gain of 1.5 million bbl. Crude stocks remain above average for this time of year, however. Gasoline inventories inched up 100,000 bbl to 195.9 million bbl against expectations of a 500,000 bbl decline. Finished gasoline stocks increased while blending components decreased. Distillate fuel inventories fell 3.7 million bbl to 124.1 bbl, surpassing an anticipated decline of 400,000 bbl.

Imports of crude into the US increased 511,000 b/d to 8.1 million b/d last week. In the 4 weeks through Sept. 28, US crude imports averaged 8.5 million b/d, down 295,000 b/d from the comparable period in 2011. Gasoline imports last week averaged 573,000 b/d, and distillate fuel imports averaged 58,000 b/d.

The input of crude into US refineries increased 222,000 b/d to 14.8 million b/d last week with units operating at 88.2% of capacity. Gasoline production increased to 9.1 million b/d, while distillate fuel production decreased to 4.6 million b/d.

Energy prices

The November contract for benchmark US light, sweet crudes decreased 59¢ to $91.89/bbl Oct. 2, ending a 3-session rally on the New York Mercantile Exchange. The December contract declined 58¢ to $92.27/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 59¢ to $91.89/bbl.

Heating oil for November delivery continued its retreat, down 1.03¢ to $3.13/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dropped 5.09¢ to $2.87/gal.

The November natural gas contract continued its rally, up 5.1¢ to $3.51/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., advanced 3.5¢ to $3.22/MMbtu.

In London, the November IPE contract for North Sea Brent lost 62¢ to $111.57/bbl. Gas oil for October fell $2.75 to $979.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes rose 3¢ to $109.32/bbl.

Contact Sam Fletcher at samf@ogjonline.com.

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